Court enforces Facebook-ConnectU settlement

Despite ConnectU's allegations of fraud on Facebook's part, a U.S. District Court judge has upheld the two social-networking sites' February settlement. The court documents remain under seal.

A U.S. District Court judge has decided to enforce the settlement that Facebook and would-be rival ConnectU signed in February, rejecting the ConnectU founders' claims of fraud.

The legal battle between the two social-networking sites has gone on since 2004, when ConnectU founders Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra initially sued Facebook founder Mark Zuckerberg and several other early employees for allegedly stealing ConnectU's code and business plan while they were all students at Harvard. Facebook countersued in 2005, claiming that ConnectU had hacked into its user database to mine e-mail addresses .

Both parties must still show up in court on July 2--a "speak now, or forever hold your peace" sort of occasion. But it appears that the public will remain shut out. Earlier this week, the same judge, James Ware of U.S. District Court in San Jose, Calif., opted to make the proceedings of the case private and keep court documents under seal. CNET News.com is evaluating a possible legal challenge to Ware's decision, which keeps matters out of public view.

ConnectU's legal team had alleged fraud on Facebook's part for a number of reasons: one, because a forensic expert it hired had unearthed instant messaging logs that were relevant to the case and which had not been used as evidence prior to the settlement, and two, because they alleged that Facebook altered the value of its common stock between an October press release that pegged it at $15 billion, and February's signing of the settlement term sheet.

Facebook, which is not publicly traded, did not deny that it had altered its valuation, but Ware deemed that the failure to disclose the change in valuation could not be considered fraudulent.

"We are happy that Judge Ware enforced the agreement settling our dispute with the ConnectU founders," according to a statement from Facebook late Wednesday night. "ConnectU's founders were represented by six lawyers and a professor at Wharton Business School when they signed the Settlement Agreement. The ConnectU founders understood the deal they made, and we are gratified that the Court rejected their false allegations of fraud. Their challenge was simply a case of 'buyers remorse,' as described by the Boston Court earlier this month."

The Facebook statement continued: "We were disappointed that we had to litigate the settlement, as we believed we were caught in the middle of a fee dispute between ConnectU's founders and its former counsel. Nevertheless, we can now consider this chapter closed and wish the Winklevoss brothers the best of luck in their future endeavors."

Cameron Winklevoss and Tyler Winklevoss remain contenders for the U.S. rowing team that will compete in the Olympics in Beijing this summer.

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About the author

Caroline McCarthy, a CNET News staff writer, is a downtown Manhattanite happily addicted to social-media tools and restaurant blogs. Her pre-CNET resume includes interning at an IT security firm and brewing cappuccinos.

 

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